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Archive for the 'Nifty Stocks' Category

While Nifty gained 112 points yesterday, the DOW lost good 230 points. This morning is showing that all the Asian markets are weak. The point that has been in mind all the time while judging the markets here is whether the disconnect between the USA and Indian markets is finally there. I hope so. The July-Sept quarter results have been a mixed bag. This is due to the slow down had occurred much earlier and some industries were affected first than the rest. There is going to be coming out of slow down mode for some now and therefore in India’s case there would be balancing act in place, in no small measure on account of govt’s alertness and timely action. According to above logic and earlier strong points mentioned, there is no place but to becoming a share-holder yourself in India’s well managed companies,less profitable at the moment or not. Profitability is of little importance, the management quality is more important because if the management is not fair to minority share-holder why be a partner there. Haven’t you seen the more than expected melt down in case of companies under managements with poor image. The extra-ordinary movements may be due to their own ill designs also.

As I told you that the forces behind the attack on market to take it down below the reasonable level had to have some scheming at its back. The matter is out in the open. There has been lending of physical stocks by FIIs to some out side Indian space of regulation and which was pressed as sales in market. This activity is going to boomerang on the operators.

By the accounting year 08-09 is over the book values would have improved further. Also during next year if the earnings remain same, the addition to book value will still be there. This way future of Nifty can not be said to be negative. The money crunch will be suitably addressed by RBI shortly, it is hoped.

I have to tell some thing already told in other words. It is about Nifty’s level now and in 2004 when it was 2000 (Jan 04). At 2000 in 2004 the PE used to be around 20 and therefore the EPS worked out to 100. Now we know that during intervening five years there has been average compounded growth of 25 pc/year since then, it would therefore work out to be over 300 EPS now for the Nifty companies universe. Discounting 3820 Nifty ( 3rd Oct 08) at 300 EPS , the PE would be around 13 . This pretty reasonable even in wake of some slow down fears. The presently offical PE for nifty is 16 and is pretty close to our working as there are three month to go before the year is out.

In light of above, it is not for no reason that the Nifty has rebounded four times after touching around/below 3800 level in last four months (latest on 3rd Oct 08).

It is a good point for taking risk. The tranche of Rs 20,000 crs is going to be released in favour banks against farmer’s loan waiver. Further, the RBI may show some efforts at cheaper money availability as the corporates are experiencing fund crunch. The US govt has demonstrated that the monetary crunch should not make jobs disappear, inflation or no inflation. The historic bailout bill was passed with this in mind and ‘main street’ has been spared woes on account of ‘wall street demeaners’. Also, Russia has released one trillion Roubles in the system for this very purpose.

Nifty firmed up yesterday and lost ground today but in the end has been able to have some points added over the closing on 1 Jul 08. May it was due to DOW loosing ground yesterday by a wide margin. Such moves can come only from the operators who are busy confusing the public and want to have occasion to pick up large quantities in Indian markets. My advice to those who actively participate in market is that they should buy on dips and they would have occasion to sell at profit. The quantum of profit may be as large as one may expect to be. Selling short and keeping quiet on advance will be fatal.

I also think that the negative news will have lesser impact and positive news will have larger impact from now onwards. The bears can not afford to sell aggressively now.The long term investors should have an eye on ‘panch-tattva’ recommendations which will posted here after every quarterly result in case of ‘nifty’ companies. For other scrips you would have to ask for paid advice and the charges have been given in the relevant category of posts.

I may invite you to look at sugar companies for investment and the fit companies are ‘bajaj hindustan’, ‘balrampur chini’ and ‘triveni engg’ . Sugar companies will benefit due to rising sugar prices and additionally on account of revenue generated out of by-products and power sales. Most of the large sugar companies have already uch arrangements. Sugar pricing will also not be a matter concern because the supreme court has given certain judgments which will be working as some sort of guideline for the govts. The rise in interest rates is negative for sugar sector but hopefully the sugar prices will more than meet the interest bill.

The banking sector and more particularly the PSBs are now well placed to reap benefit of higher PLR as the RBI has raised repo rates but has not changed reverse repo rates hence the active banks will lend out to corporates rather than keep cash idle or with RBI. Those of the banks which a lot of owned funds will benefit (PSBs are pretty rich that way) while the private new age banks will have some constraint on this score.

RBI has in a sudden move,though expected at some time in near future, has raised the repo rate by 75 bps and has further raised the CRR by 50 bps to be implemented in two tranches.

Earlier RBI Governor had informed that the necessary tightening of money supply and raising of interest rate would be resorted too but with a consideration that the growth does not take a beating. Inflation at high level is the cause for it. The markets took a negative view and opened lower but strangely, not for me, through out the day buying was made by some quarters without upsetting the applecart and in a very subtle way which saw the down opening turning in to a decent gain over the last closing. Clearly, some smart people are accumulating good stocks in general. I have told you earlier that the entire Nifty universe has opened buying opportunity and those who wish to be on the right side of investment may buy.

The political bad news, the economic bad news and the international bad news is slowly loosing its effect on Indian market as the values have become very proper, for the entry to be made. The profitability may loose its tempo but the future profitability is not going to be affected by the intervening period of tight money supply and high interest rates as the real interest rate is still not high, rather it is on the lower side of the range it has traditionally maintained.

So, my advice still stands i.e. buy for long term without getting unnerved and buy the companies under good managements only for the long term delivery of rewards can only be expected from such groups. The mediocre may not be kept long term company and the dishonest have to shunned out rightly. I have been indicating as to who has what character from time to time, not that I want to throw bad light on someone but I feel duty bound to let my readers know the true colors of the managements as it is necessary to have such an idea for an investor before he commits hard earned money.